Shares of SeaWorld Entertainment (SEAS 1.99%) are moving higher on Thursday after Bloomberg reported that Merlin Entertainments Plc has approached the theme park operator about acquiring some of its assets. It doesn't take a rocket scientist -- or a marine biologist -- to figure out what Merlin wants. The U.K.-based operator of Legoland, Alton Towers, Thorpe Park, and several other parks and attractions including the Madame Tussauds wax museum franchise is gunning for SeaWorld's Busch Gardens.
Merlin singled out Busch Gardens Tampa and Busch Gardens Williamsburg in its August earnings call as parks it would like to acquire. SeaWorld would obviously prefer to sell the company outright, and the stock is moving higher on the hope that it goes that route and successfully finds someone willing buy it outright at a premium. Bloomberg is reporting that other potential suitors have stepped up for the out-of-favor leisure company. Disney (DIS +0.87%) likely isn't one of those names, but it's one that starts to make more sense the more one thinks about it.
Image source: Disney.
If you can dream it, you can do it
There may not seem to be any good reason for the world's largest theme park operator to play small ball. Disney's least-visited domestic park -- Disney's California Adventure in Anaheim -- attracted nearly 9.3 million guests last year, according to Themed Entertainment Association. SeaWorld's most successful park is SeaWorld Orlando with 4.4 million visitors last year. Why would Disney slum it here?
Well, let's start with the fact that SeaWorld's attractions have a heavy concentration in Central Florida and Southern California. Disney can use it as a way to extend vacations, especially after it invests in upgrading the parks with E-ticket attractions. There's also the addition of SeaWorld San Antonio and its adjacent Aquatica water park, giving Disney a presence in the middle of the country in another touristy hotspot with access to year-round operating hours.
Then we have Busch Gardens Williamsburg. Way back in 1993, Disney announced that it was developing an American history-themed park in Virginia. It never happened, but a visit to Colonial Williamsburg was supposedly the inspiration. Busch Gardens Williamsburg could be Disney's America, and it would be a lot cheaper to update that property in Southern Virginia than to start from scratch in Northern Virginia.
SeaWorld's three namesake parks are controversial, but activists would be toasting Disney instead of roasting SeaWorld if the House of Mouse would release the killer whales into sea pens and flesh out those parks with more family-friendly dark rides and attractions. Tokyo DisneySea -- the world's fifth most visited theme park and one that is licensed but not owned by Disney -- is proof that a marine-themed park can thrive without trained killer whales and dolphins leaping out of the water for treats. Tokyo DisneySea is the roadmap for any potential buyer to steer clear of activist protestors, and Disney is already there.
Any bidding war for SeaWorld Entertainment will be modest, and Disney can use the distraction as its stateside theme parks have experienced stagnant attendance trends since last year. Disney's nearest rival is growing faster, narrowing the gap, and buying SeaWorld can also be a way to keep it out of a competitor's mitts. CEO Robert Iger has made 10-figure acquisitions to keep its movie studio and networks relevant. It's time to take a similar approach to its theme parks business before someone else does -- and before he steps down in two years.
